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Year-over-year comparisons tricky after 2017-Q1 extremes

Toronto, Ontario - April 5, 2018 - Realtors® in Toronto and the Greater Toronto Area released the March, 2018 MLS® market stats today via the Toronto Real Estate Board’s monthly “MarketWatch” publication showing that, while sales have definitely tumbled hard compared to last March - and available inventory has more than doubled - to accurately see now where the market is in the bigger picture requires a broader scope than the usual “Year-over-Year”. That’s the best barometer in a normal market due to the strong seasonality of residential real estate, but the market’s been anything but normal in recent memory.

First of all, though, let’s take a quick look at the new report and how it does directly compare to the year-earlier month, then we’ll take a step back to broaden the horizon:

Sales of Detached homes in Metro Toronto dropped 41% year-over-year to 706 units at an average sale price of $1,293,903, a 17.1% drop. In the rest of the GTA, 2,414 Detached homes sold representing a 47.7% “tanking” at an average price of $921,515, down 17.9%. Bottom line: If you bought this average Detached house in an Average GTA area one year ago, your “hypothetical” asset’s dropped about $170,000.

As you can see from the included charts, the numbers were somewhat better for Semi-Detached homes and Townhomes in Toronto and the balance of the GTA…though all were in the red year-over-year to varying degrees in terms of both the number of sales and the average selling price. Homes took “twice as long” to sell this March averaging 20 days on the market versus 10 one March ago. Overall - including all TREB areas and all residential property types & styles - the YoY average selling price was off 14.3% to $784,558. Pinballing around in recent months, that Overall Average had actually bottomed late last summer at $732,292 before rebounding in the fall of '18, softening again through the winter, then bouncing back again in February.

Condo price softening on the horizon?

The average selling price of Condominium Apartments has certainly not suffered across TREB’s market area. Yet. In “The 416” the average sale price was up 7.1% to $590,184, and in the balance of the GTA it was up 2.1% to $449,967. But the decline in the number of sales has been accelerating and even though it’s been negative on a year-over-year basis ever since last spring, price gains have remained robust. This month’s gains look a little meagre in comparison to previous months, though. And how long can prices continue to rise as sales fall so significantly? In March, there were 2,183 Condo Apartment sales in total across TREB’s market area through the MLS® system. One year earlier there were 2,324 in Metro Toronto alone. [The overall MLS® sales were 3,261 last March…meaning the overall drop in sales was 32.7% - a roughly even drop for both Metro TO and the balance of the GTA.]

Of course, one year ago we were also awaiting word from policy makers about what “needed” to be done about the out-of-control housing market…and make policy they did. In what was perhaps yet another classic case of “shutting the barn door after the horse got out”, many still opine that that market was not sustainable and would have corrected naturally…even in the face of artificially low interest rates and other external stimuli…but those are topics that require far more in-depth discussion and server storage space than is allotted here.

Was March, 2018 the Toronto & GTA housing market catastrophe some have called it? Hardly. More like getting back to normal. Of course, that’s small consolation if you were caught up in the hype of “plus or minus 1 year ago”. But this too shall pass. Nothing goes straight up. Or straight down, for that matter. And, with interest rates looking like they’re going to normalize…along with some other headwinds facing the markets generally [NAFTA; DJT in general; mortgage rules, etc.]…it’ll probably take awhile. But, in the big picture, the world will go on. Just don’t expect it to turn around over night. Given that we’re still up ~14% compared to March, 2016, and ~51% in 5 years in the overall average price front, we quite possibly will see more price melt in the mid-term - though quite possibly a moderation in that melt in the very short term for the traditional Spring Market. If Spring ever gets here…

When the market went into reverse in 1989 it took years to bottom…and then more years to get back to the 1989 peak - which it then surpassed. More on that “market turn” and it’s timelines in the coming days…

Jason Mercer, TREB’s Director of Market Analysis said in the report, “Right now, when we are comparing home prices, we are comparing two starkly different periods of time: last year, when we had less than a month of inventory versus this year with inventory levels ranging between two and three months. It makes sense that we haven’t seen prices climb back to last year’s peak. However, in the second half of the year, expect to see the annual rate of price growth improve compared to Q1, as sales increase relative to the below-average level of listings”.

Added Board President, Tim Syrianos, “TREB stated in its recent Market Outlook report that Q1 sales would be down from the record pace set in Q1 2017. The effects of the Fair Housing Plan, the new OSFI-mandated stress test and generally higher borrowing costs have prompted some buyers to put their purchasing decision on hold. Home sales are expected to be up relative to 2017 in the second half of this year.”

We’re not sure about home sales being up YoY in the 2nd half of 2018: That’s a bit of a crap shoot. But it’s certainly worth pointing out that the average prices in this report were greatly impacted by the larger drop in sales within the higher-priced Detached group in general, and a more than 50% drop in the number of sales of GTA homes over two million dollars.

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